1. The Field of the Invention
The present invention is generally related to online commerce and, even more particularly, to systems and methods for conducting online firearms transactions.
2. The Relevant Technology
Gun ownership has always been a treasured right of Americans. This right is clearly established in the Second Amendment to the Constitution of the United States as one of the fundamental rights guaranteed to all Citizens of the United States. Second Amendment rights are necessary, according to some, to ensure a means for providing continued protection of their family and property. Firearms are also an integral tool in many recreational and hunting activities. For at least the foregoing reasons, many citizens have taken the opportunity to purchase and own a gun.
It is estimated that over 200 million guns, having a worth of over $40 Billion USD, are privately owned in United States. These guns are found in about 50 percent of all households. It is also estimated that approximately five percent of the overall U.S. population has a concealed handgun permit.
It is well established that adverse economic conditions will result in a general increase in crime. Accordingly, the current risk of an economic collapse, as well as an anticipated democratic action to limit Second Amendment rights, has fueled an unprecedented demand for guns with gun purchases occurring at historic highs and applications for permits increasing by about 400 percent over the last year.
Transactions for guns sold in this burgeoning and rapidly accelerating market occur in a variety of settings, including small retail stores, mass merchandisers, small independent retailers, pawn shops, small auctions, mail-order, and online Internet-based auction sites. Interestingly, in the gun industry, manufacturers have not yet entered the market to sell directly to retail customers.
Many Federal regulations, enforced by The United States Bureau of Alcohol and Tobacco (BATF), impose legal requirements on the purchase and sale of firearms. Any individual that is involved in the illegal sale, purchase, or transfer of firearms may violate these regulations, which is a felony punishable by imprisonment and confiscation of the firearm(s).
Two general rules apply to the majority of gun transactions. The first rule is that an instant background check must be performed on the purchaser before a gun is sold. This is done to assure that the purchaser is not a “restricted person,” who, for any number of legal reasons, has lost his rights to purchase or possess a gun. The second rule is that no gun may be transported across a state boundary during the sale of the gun unless the gun is transferred through a “Federally Licensed Firearms Dealer” (FFL) on both ends of the transaction. There are currently estimated to be about 90,000 FFLs. Regulations also require the careful collection, storage, and reporting of all records associated with gun sales.
For certain specialty firearms, even more restrictive regulations apply, including requirements for special occupation tax status, tax stamps, and, in some cases, outright bans of transactions except to qualified law enforcement personnel.
Only a very limited exception exists for many of the foregoing federal regulations. This exception, which is frequently termed the gun show loophole, allows a firearm to be sold between two private parties who are not generally engaged in the business of selling firearms when the sale occurs within states boundaries and does not require an instant background check or the involvement of an FFL in the transaction.
In addition to federal regulations, each state also has its own unique set of state-level firearm regulations. State regulations vary widely, from essentially no restrictions, such as in Alaska, to significant restrictions, such as in California. Local rules enacted by townships or cities, such as those enacted by New York City, Washington, D.C., and Chicago, can further complicate this issue.
It has been estimated that more than 20,000 federal, state and local laws have been imposed on firearms in the United States. These laws represent a complex web of regulations which have continuously shifted since 1933, including as recently as January of 2009 in the form of House Bill 45.
Although the regulatory environment is extraordinarily strict, the actual go-to market sales approach for transacting firearms is comparatively disorderly and somewhat reminiscent of how business was transacted in the 1950s. For instance, the marketplace is riddled with unsophisticated transactions occurring in small stores, person-to-person sales, and other relatively loose manufacturing-to-warehouse-to-jobber-to dealer-to-retailer type selling structures which fail to derive any benefit from existing economic consolidation strategies or corresponding economies of scale. In fact, supply and demand without any market insight or intelligence at the most local of levels appears to be the “rule of the day,” if any economic rules at all can be said to apply. Currently, there are no central transaction points, clearinghouses, exchanges, or other consolidated systems for firearms transactions in the marketplace.
The lack of a centralized marketplace to establish real-time firearm pricing standards and national or at least regional inventory levels has placed the firearms industry in a uniquely susceptible position in which misinformation is often used to exploit the greed and fear of both buyers and sellers. For instance, when it deceptively rumored that the government was drafting a House Bill that would impose a 500 percent tax on ammunition, it took only a couple of weeks for the price of ammunition to increase substantially, and for many types of ammunition to be sold out at gun stores throughout the country. Several months later, the drain on ammunition supplies is still significant, even though it has since been clarified that HB 45, the pending House Bill in question, was only proposing a smaller $0.05 per unit tax.
Similarly, when it was feared that a popular semi-automatic rifle would become illegal to buy due to its similarity in appearance to a military rifle, prices for that rifle dramatically increased, and virtually all available inventory for that rifle was purchased in a matter of weeks. These are but two of many examples where the lack of a centralized clearinghouse, marketplace, or exchange for firearms has allowed pricing abuses to exist in the face of rumors, fear, and poor information, and for local shortages of inventories to feed those fears, since there is no centralized verification of national real-time market prices or inventory levels.
It is clear that the prices of firearms and ammunition will fluctuate, sometimes wildly, in response to legal uncertainty and rumor mongering. It is also clear that the prices of firearms will dramatically and continuously increase in response to actual restrictions placed on firearms. For instance, laws have been enacted which restrict availability of certain types of weapons manufactured before 1986, such as the MAC 10 and MP5. Consequently, their prices have increased from about $100 each to about $25,000 and are still climbing. However, due to a lack of centralized information, actual inventory levels and prices are difficult to verify, thereby enhancing the potential for pricing abuses.
Currently, there are no existing centralized exchanges or clearinghouses for firearms that maintain databases of existing inventory levels of new and used firearms on a national or even regional basis. Instead, a purchaser is left having to speculate or at least investigate countless individual FFL and private inventories. Even Amazon and eBay, two of the larger and most popular online marketplaces, do not offer guns for sale. One reason for this is presumably due to the inherent difficulties involved in navigating the complex web of legal regulations surrounding firearms transactions as mentioned above.
One popular venue for purchasing firearms is through an auction. Some in-person auctions such as farm auctions and local liquidation type auctions are held throughout the country to satisfy this desire and to facilitate firearms transactions involving larger inventories than are typically available through local retailers. Additionally, some online auctions, such as GunsAmerica and KSL classifieds, which have also been developed for many of the same purposes, provide even greater inventory levels. One online dealer, Gunbroker.com, even boasts 100,000 guns on its website. However, the inventory levels presented by these existing providers, as well as other online sources, still remain relatively small in comparison to the actual firearms inventories that exist at FFLs and other dealers on a national or even regional level.
Existing online firearms auction suppliers also fail to provide a sufficiently safe, secure, and legal consumer environment for performing online firearms transactions in such a way as to adequately address the complexities of existing regulations. In particular, there is no provision for legally obtaining a firearm. There is no validation of identity, instant background check, or requirement for using licensed FFL dealers for interstate transactions.
Additionally, existing online auction suppliers also fail to provide any means for actually completing an entire firearm transaction. Instead, they merely loosely connect prospective buyers with prospective sellers leaving the details of the actual transaction to the parties involved and, in so doing, offer no protection against fraud or lawlessness. There is no means for financially establishing or completing a transaction, or for returning defective or incorrectly advertised merchandise. There is also no assurance that the firearms advertised may legally be sold, that the weapon actually exists, or that once the purchaser's payment is received (always up front), the firearms will be shipped or as advertised. In short, buying firearms facilitated by this uncontrolled pseudo-process is fraught with uncertainty and the risk of fraud and felony at every turn.